Transcript Public Investment Management in Zambia

Tuan Minh Le
Patricia Palale ([email protected])
Gael Raballand ([email protected])
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Outline
1. Context
2. PIM Diagnostic
3. A Way Forward?
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Context
 Macro
 Political Economy
 Institutional
 Governance
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Macro Context
 Zambia is a large country with low density and sparse
population: geographical and demographic
impediments to PIM efficiency.
 Donor dependent country though the trend is slowly
shifting.
 Low level of capital expenditures (app. 4% of GDP
2009), while capital/recurrent expenditures
persistently decrease.
 Strong economic growth during 1999-2008 but still not
translated into significant decline in poverty, especially
in rural areas.
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Political Economy Context
 Wide-scale ambitious reforms do not fare well.
 First best solutions have usually not worked well.
 Governance challenges do not explain all the negative
outcomes. There is also sometimes:
 neglect, in which actual public policy does not follow
stated policy priorities, and
 lack of capacity to implement, or simply wellintentioned incompetence.
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Institutional Context
 There is a great fragmentation of institutions and there is
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usually an absence of accountability.
Ministry of Finance is relatively weak and does not usually
play its challenging role.
The Ministry of Works and Supply, which according to the
law, is supposed to be in charge of physical investments,
has lost some control of this function.
Sectors are playing a greater role in making PIM decisions,
from prescreening of project proposals to implementation
and supervision & monitoring.
Recent PFM reforms have not necessarily addressed some
key PIM challenges.
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PIM Diagnostic
 Investment guidance and preliminary screening
 Formal Project Appraisal
 Budgeting and Project Selection
 Project Implementation
 Project Adjustment
 Facility Operation
 Project Evaluation
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Investment guidance and preliminary
screening
 A number of long to medium term planning
instruments developed and intended for guiding
annual budgeting in general and prioritization in
capital budgeting in particular.
 The National Long Term Vision 2030.
 The Fifth National Development Plan (FNDP) 2006-10 -
to be succeeded by the Sixth National Development
Plan (SNDP).
 Sector-specific development strategies.
 MTEF.
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Investment guidance and
preliminary screening (2)
 But the poor quality of strategic/medium term
guidance leads to inefficient investment prioritization
and investment screening.
 FNDP lacked a robust macro fiscal framework or
guidance for sector and regional development policies
and strategies.
 Sector strategies – typically used to pre-screen project
proposals – reflect optimism bias with no credible link
with revenue estimation.
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Formal Project Appraisal
 Dual modalities for donor financed and government
financed project proposals.
 Highly decentralized appraisal process while key
challenges long existing:
 Inadequate legal framework and lack of centrally
publicized/transparent guidance for project appraisal.
 Weak institutional capacity in appraisal function.
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Formal project appraisal (2)
 The whole process of prescreening and appraisal
managed exclusively by Sectors.
 No integrated central guidance on project appraisal
and selection developed. Planning and Budgeting Bill
still under preparation.
 CBA/CEA for deemed significant projects, but no
transparent threshold for conducting such analyses or
no formal guidance for methodology.
 The core functions of independent review of appraisal
de facto are missing – no challenge function.
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Budgeting and Project Selection
 Although MTEF was one of the biggest strides in PFM,
quality of MTEF still needs to be improved.
 Complete disconnect of the MoFNP from project
planning and evaluation by sectors, breaking link
between the budget cycle and the specific project
appraisal and selection process.
 MoFNP active role remains confined to establishing
sector envelopes with no downstream follow-up.
 Disconnect between strategic capital planning,
budgeting, and project selection -- in effect heavily
discount the gate keeper function.
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Project Implementation
 Budgeting focuses more on annual cost control rather than on
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total cost control.
The absence of central guidelines for project implementation.
Implementing agencies not under pressure - nor do they have
any vested incentives-- to prepare periodic progress reports and
to establish a comprehensive database that could have helped
trace progress and detect early symptoms of project delays and
incompleteness.
MoFNP and Ministry of Works and Supply have no
capacity/mechanisms to identify and analyze the root causes of
incompleteness or cost overrun.
Reforms in procurement are being conducted, but competitive
bidding is either not strictly feasible or enforceable due to a
number of challenges.
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Project Adjustment
 Updating project financial or economic analysis is not
mandatory for receiving the next tranche of project financing.
 Change in completion plan or investment costs is usually done or
presented on an ad hoc basis.
 M&E Department at MoFNP is responsible for monitoring and
facilitating the development of M&E systems project
implementation in sectors. But it faces numerous challenges:
 Understaffed (with only 6 officials) to carry its ambitious mandates.
 Coordination, internally in MoFNP, or externally with MPSAs, is
particularly difficult.
 Active monitoring of project implementation does not exist – no
links with sector planning units.
 What appears to be a duplication of roles with the Project
Implementation department within MoFNP
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Facility Operation
 A mechanism to undertake inventory and registration of
public property being developed. The process was
significantly delayed. (The mechanism is planned to be
developed and implemented by December 2006 but until
late 2008, only 80% of the work has been completed.)
 The establishment of a database of government property –
which is scheduled to be operational by 2007—has also
been postponed: by the end of 2008, only 10% of the work
plan was completed.
 Donors tend to undermine national systems where they
exist – e.g. motor vehicle registration.
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Project Evaluation
 No formal institutional arrangement to allow for
effective central monitoring and feeding the
evaluation results into learning, communicating and
drawing lessons for new project cycles.
 MPSAs are responsible for making all decisions on
project selection, implementation and tracking service
deliveries whereas M&E, Budget and Planning
Departments in the MoFNP do not play a direct role in
their evaluation.
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Summary Findings
- Predominant role of line Ministries in appraising
project and implementation,
- Weak challenging role and unclear institutional
mandates of the MoFNP,
- Lack of vertical and horizontal coordination and crossinstitutional misaligned incentives
=> Leading to low public investment efficiency and
rampant corruption in some sectors.
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Way forward?
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Focus engagement narrowly is preferable
 Need to consider feasible steps that will concentrate
on institutional building that will call attention to
promoting accountability systems
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………..keeping in mind that first best solutions will
probably not work …………………..
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What can be the way forward?
The First Best… (guiding light….)
1. Legal reform constitutes a critical institutional
development to strengthen PIM in Zambia,
2. The MoFNP should be mandated with preparing central,
uniform guidelines for public investment evaluation.
3. The MoFNP should publish standard guidance on
appropriate format of project proposals and techniques
applicable to evaluate economic and social values as
appropriate to the scale and scope of proposed projects and
commensurate to appraisal capacity at MPSAs.
4. Basic architecture for de facto missing functions (e.g.,
independent review and ex-post evaluation) needs to be
established.
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What can be the way forward?
The feasible way…..
 Pilot experiments in some sectors/Ministries (where
there is an explicit link with beneficiaries, such as
access to health, education, water) by:
 reviewing strategies,
 develop monitoring and evaluation systems,
 change project implementation,
 develop impact evaluation.
 Strengthen MoFNP (M&E department??). Initial step
could be to work with Office of the Auditor General —
to carry out an ex post review of recently completed
projects in several sectors…….
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Conclusions
 PIM in Zambia embedded in the political economy
context,
 Intrinsic weak role of the MoFNP on PIM issues could
continue in the near future,
 However, some experiments / pilots in some sectors /
Ministries should be undertaken to strengthen the
MoFNP at the margin.
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